£3m fund for product-based start-ups launches

A £3m fund for product-based start-ups seeking to scale has been launched by successful entrepreneur Damon Bonser, who made his name selling impulse consumer products.

Bonser, who co-founded product-based business Spinning Hat in 2005 which was sold to GiftRepublic.com last year, has set up the British Design Fund to plug a funding gap he spotted while mentoring start-ups.

The fund, which has a close relationship with the Design Council, expects to make a first close at £3m and will start making investments in late September, Bonser said.

Damon Bonser

Focused on consumer product and hardware-based businesses that can “solve real problems” and have intellectual property secured against them, funding for Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)-qualifying companies will be provided to help the start-ups accelerate their growth.

“I was mentoring on an incubator for digital entrepreneurs called the Accelerator Academy and doing work with the Design Council at the same time,” said Bonser. “People approached me needing to raise money and while it’s not difficult to fill a room with institutional funds ready to put money into early stage technology companies, the same was not true of product design businesses.”

While crowdfunding platforms such as Indigogo and Kickstarter exist to provide a means for product designers to fund their first manufacturing run, Bonser said this approach can be “expensive and you don’t get the expertise needed to deliver and accelerate the business”.

“We will provide market sector expertise to all the companies we invest in which will significantly increase the chances of successful product launch and reduce the risks associated with manufacturing.”

Speaking about the need for start-up applicants to understand the commercials behind their business and to focus on scalability, 2010 Growing Business Young Gun Bonser said: “We’re interested in businesses that can ramp up sales globally, have already validated demand for their product such as with Kickstarter orders, and are seeking to sell to big consumer product buyers,” he adds.

The fund is not for product designers looking to primarily sell direct to consumers. “This is for companies that want to sell large volumes to global buyers. Business-to-consumer is not our area of expertise and can often leave companies sitting on a lot of stock,” said Bonser.

Ultimately, the fund will see to exit via private equity or venture capital buy-outs.